TUI to sell specialist holiday business in mass market drive

TUI to sell specialist holiday business in mass market drive

TUI to sell specialist holiday business in mass market drive

DHA photo

European travel group TUI is to sell its specialist adventure and education holiday brands to focus on its main mass market tourism business and plans to use proceeds from disposals for future growth.

TUI said May 11 that the specialist brands did not fit with its main holiday and cruise group, which in its 2014-15 financial year accounted for almost 85 percent of revenues.

This follows the sale last month of TUI’s Hotelbeds business for around 1.2 billion euros ($1.4 billion).

These M&A deals are the latest step by TUI management to reshape the tourism group which was created in 2014 by the merger of London-listed TUI Travel and German majority owner TUI AG. TUI also owns a little more than 12 percent of shipping group Hapag-Lloyd, which it plans to sell, although it has said is under no time pressure to do so.

The company’s shares fell 2.3 percent, which analysts said was in response to TUI’s plan to keep hold of disposal proceeds.

“There was no mention of return of cash to shareholders so I think if anything that is probably the disappointment,” Cenkos analyst Simon French said.

Selling the specialist group, which comprises more than 50 brands and had sales of 1.8 billion euros last year, would be the best way to maximize value for TUI’s shareholders, the company said.

As with the Hotelbeds disposal, the company said it planned to use the proceeds to invest in future growth opportunities and strengthen its balance sheet.

Chief Executive Fritz Joussen defended the company’s plan.

“Our aim is to grow, and growing earnings by 10 percent a year is not possible unless you invest,” Joussen told reporters after the group reported first-half results showing first-half profit up 16 percent.

TUI also confirmed it was on track for underlying earnings growth of at least ten percent in its current financial year.

Bookings for the summer were 1 percent ahead of last year and demand for holidays was strong, it said. That contrasted with warnings from airlines that attacks in Paris in November and in Brussels in March has hit demand for flights.

But TUI said customers continued to shift away from Turkey to other destinations due to security concerns,
Separately, the group said it would expand its main holiday and cruise group in France through a deal to buy Canada-owned Transat’s French tour operating unit for 55 million euros.

The deal will make TUI a market-leader in France’s tour operator industry and add new long-haul destinations, TUI said.